HSBC says Middle East geopolitics and oil prices are the main drivers of the US dollar and other major G8 currencies. It points to a stronger recent link between the dollar and oil, linked to supply shocks and safe-haven flows.

The bank says market moves may depend on shipping disruption through the Strait of Hormuz and the path of oil prices. It adds that swings in geopolitical risk can push markets between “risk-off” and “risk-on”.

Oil And Dollar Link Strengthens

HSBC says lower oil could help net energy importers and support risk appetite, with “risk-on” currencies outperforming “safe-haven” currencies. It says the Japanese yen may lag, and notes intervention risk when USD/JPY is in the 158–162 range.

It says oil stabilising at $100 may reduce short-term pressure on net importers, while recession risk is described as limited and fiscal concerns may rise. Under this scenario, it expects range-bound FX with a mild tilt towards the dollar.

HSBC says prolonged disruption to oil and gas flows via Hormuz could weaken sentiment, increase safe-haven demand, and hurt net importers through terms-of-trade effects. If the dollar–oil link weakens, it says pre-conflict FX fundamentals may matter more again, and it notes the Fed is not in a rate-hiking cycle nor outright hawkish.

We believe that Middle East geopolitics and oil prices are the main things moving foreign exchange markets right now. Market direction will likely depend on practical signs, such as shipping disruptions in the Strait of Hormuz, which directly impact oil prices. As these tensions rise and fall, oil can move sharply, and so can market sentiment.

Signals To Watch In Markets

Since the conflict intensified in late 2025, we have seen the US dollar and oil prices move more closely together. With Brent crude recently trading near $98 a barrel and the Dollar Index (DXY) firm above 106, this reflects both worries about energy supply and investors seeking the dollar as a safe haven. This is a change from the behaviour we observed for most of last year.

A prolonged disruption would likely hurt countries that are net energy importers, such as those in the Eurozone and Japan. Data from the first quarter of 2026 already shows a rising energy import bill for the European Union, which may continue to weigh on the euro. Traders should watch for any escalation that could justify strategies betting on further EUR/USD weakness.

The Japanese yen is particularly weak, but caution is needed as USD/JPY now trades above 159. We remember that similar levels around 160 prompted intervention from Japanese authorities back in late 2025. This risk makes it tricky to bet on continued yen weakness, as a sudden government action could cause a sharp reversal.

If we see the positive link between oil and the dollar begin to break, it may be an early sign that old market behaviours are returning. For instance, a drop in oil prices back toward the $85 levels seen late last year would likely boost risk appetite and benefit commodity currencies. Watch for sustained, peaceful passage of tankers through the Strait of Hormuz as a key signal for this shift.

We should also consider that factors are in place that may limit broad-based dollar strength. The Federal Reserve is not raising interest rates, and while March’s inflation data came in a bit high at 3.1%, the Fed has not turned more aggressive. This stance could cap the dollar’s rally if the immediate geopolitical fears begin to fade.

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NZD/USD fell at the start of the week, trading near 0.5830 on Monday, down 0.15%, after US-Iran talks failed over the weekend. The discussions lasted nearly 21 hours and were mediated by Pakistan, but ended without progress.

US Vice President JD Vance said the US put a “best and final offer” forward, which Iran rejected. US President Donald Trump said the US Navy could begin blockading the Strait of Hormuz, putting a two-week ceasefire at risk.

Risk Appetite And Dollar Demand

Rising tensions reduced risk appetite and increased demand for safe-haven assets, supporting the US Dollar and weighing on NZD/USD. Higher oil prices raised inflation concerns and supported expectations that the Federal Reserve may keep policy restrictive for longer, alongside higher US Treasury yields.

TD Securities said the Fed outlook depends on Iran developments, recent inflation data, and incoming activity indicators. The bank expects the Fed to keep rates on hold until September while assessing energy-price effects and geopolitical risks.

In New Zealand, RBNZ Governor Anna Breman said growth could be stronger this year if the Middle East conflict ends quickly. She said past rate cuts are still supporting the economy, but supply disruptions and conflict duration remain uncertain.

The Wall Street Journal reported regional countries are seeking to restart talks within days, limiting US Dollar gains and helping NZD/USD recover from intraday lows.

Strategy And Volatility Considerations

Given the breakdown in negotiations, the immediate path for NZD/USD seems to favor further weakness. We believe traders should consider buying NZD/USD put options with expirations in May or June 2026. This strategy allows for participation in potential downside while capping risk at the premium paid, which is prudent given the volatile geopolitical climate.

The market is clearly pricing in this uncertainty, as implied volatility on one-month NZD/USD options has surged to over 15%, a level we have not seen since the banking stresses back in 2025. This elevated volatility reflects the potential for sharp moves, making defined-risk options strategies more suitable than outright shorting futures. For those with a slightly less bearish view, a bearish put spread could lower the entry cost.

Rising oil is a key factor supporting the strong US dollar, as it feeds into the Federal Reserve staying on hold. With WTI crude futures now pushing past $95 a barrel, the highest since last October, fears of persistent inflation will keep US Treasury yields firm. This interest rate differential between the US and New Zealand will continue to weigh on the currency pair.

However, we must remain alert to the possibility of a sudden reversal, as reports of renewed diplomatic efforts could unwind this risk premium quickly. We saw a similar pattern during Middle East tensions in late 2025, where sharp downward moves reversed quickly on any hint of de-escalation. This threat of a snapback rally makes holding outright short positions particularly risky.

From a positioning standpoint, CFTC data from last week showed large speculators already held significant short positions on the Kiwi dollar. A decisive break below the 0.5800 psychological level could trigger a wave of stop-loss orders and accelerate the decline. Therefore, we will be watching that level closely as a key indicator in the coming days.

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The IMF will publish the World Economic Outlook on Tuesday, and it is expected to show lower global growth forecasts. IMF managing director Kristalina Georgieva said global growth will be downgraded even in the most hopeful scenario of a swift normalisation from the energy shock.

Georgieva also referred to limited fiscal space, linked to rising public debt and higher interest payments. This points to pressure on government finances as borrowing costs increase.

Imf Reports In Focus

The IMF will also release the Global Financial Stability Report on Tuesday and the Fiscal Monitor on Wednesday. These reports are set to assess sovereign debt sustainability.

The risk described is that an energy shock could turn into a fiscal shock as higher borrowing costs meet already stretched public finances. Another factor mentioned is that sovereign debt is increasingly held by price-sensitive hedged funds.

The upcoming IMF reports this week are poised to confirm a weaker outlook for the global economy. We expect official downgrades to growth forecasts, with a spotlight on the growing problem of government debt and rising interest payments. This creates a cautious environment for the coming weeks.

This warning about fiscal space is timely, as public debt levels remain historically high. U.S. federal debt is currently over 120% of GDP, while in the Eurozone, Italy’s ratio stands near 140%, highlighting the sensitivity to the European Central Bank’s interest rate policy. These stretched finances are a key vulnerability that the new reports will likely emphasize.

Market Implications And Positioning

We see a clear risk that the energy shock, which has kept inflation persistent, could morph into a fiscal shock as borrowing costs rise. This scenario suggests positioning for higher volatility in government bond markets. Derivative traders could consider put options on long-term Treasury and Bund futures to hedge against a sudden spike in yields.

For equity markets, a global growth downgrade implies pressure on corporate earnings and investor sentiment. The CBOE Volatility Index, or VIX, is already showing some nervousness, trading around 22. Buying put options on major indices like the S&P 500 or STOXX 600 offers a direct way to protect against a market downturn.

In foreign exchange, a risk-off tone typically benefits safe-haven currencies. Looking back at the market reaction to sovereign debt jitters in late 2025, we saw a distinct rally in the U.S. dollar. A similar flight to quality could make long positions on the dollar attractive against currencies of nations with weaker fiscal positions.

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TD Securities strategists Oscar Munoz and Eli Nir link US macro conditions and Federal Reserve policy expectations to developments in Iran, recent inflation readings, and incoming activity data. They expect higher oil prices and geopolitical uncertainty to raise stagflation risks and keep policy restrictive.

They expect the Fed to stay on hold until September 2026 while it assesses the situation in Iran and its economic effects. They also expect inflation progress to resume by then, supporting a gradual move towards a more neutral stance.

Higher Oil Prices Raise Stagflation Risks

They forecast 50bps of easing in 2026, split between September and December. They also project a further 25bps cut in March 2027, leaving the Fed funds rate at 3.00%.

The article says it was created with the help of an Artificial Intelligence tool and reviewed by an editor. It also states that future decisions will depend on incoming data.

Given the recent escalations near the Strait of Hormuz and last week’s March CPI print coming in hotter than expected at 3.1% year-over-year, we expect the Federal Reserve will remain patient. The central bank is likely to stay on hold until its September meeting as it assesses the impact of these developments on the economy. This policy path will be highly dependent on incoming data to force the Fed’s hand.

For interest rate traders, this suggests the market may be pricing in rate cuts too early. Fed funds futures currently imply a nearly 40% chance of a cut by July, which we view as overly optimistic in this environment. Therefore, positions that bet on a hawkish hold, such as selling front-month SOFR futures or buying puts on them, could be advantageous.

Positioning For Volatility And Defensive Trades

This combination of geopolitical risk and sticky inflation points to elevated market volatility. With the VIX index climbing back toward 19, it is prudent to consider owning protection against sudden shocks. Buying call options on the VIX or related ETFs provides a direct way to hedge portfolios against rising uncertainty in the coming weeks.

The stagflationary pressure from higher oil prices, with WTI crude now holding firmly above $98 a barrel, should not be underestimated. We believe this geopolitical risk premium is likely to persist, making bullish positions on energy attractive. Using call spreads on oil futures or the USO ETF can offer upside exposure while clearly defining the risk.

Looking back, we saw the Fed signal a more patient approach in late 2025 after inflation proved more persistent than forecasts had suggested. The market’s initial hopes for several cuts in the first half of 2026 were based on a disinflationary trend that has now stalled. This history supports our view that the bar for the Fed to begin easing is much higher now.

In the equity space, this environment is challenging for stocks as high input costs and restrictive policy can squeeze margins. We would recommend using options to establish a defensive posture on growth-sensitive indices like the Nasdaq 100. Buying put spreads or selling out-of-the-money call spreads could protect against potential market downside through the summer.

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Fastenal reported quarterly earnings of $0.30 per share, matching the Zacks Consensus Estimate and up from $0.26 a year earlier, adjusted for non-recurring items. In the prior quarter, it was expected to earn $0.26 per share and reported $0.26, with no surprise, and it has beaten consensus EPS estimates once in the past four quarters.

Revenue for the quarter ended March 2026 was $2.2 billion, 0.04% above the consensus estimate, compared with $1.96 billion a year ago. Over the last four quarters, Fastenal exceeded consensus revenue estimates twice.

Fastenal shares are up about 22.5% year to date, versus a 0.4% fall for the S&P 500. The durability of any near-term share move may depend on management commentary during the earnings call.

Consensus estimates are $0.33 EPS on $2.3 billion of revenue for the next quarter, and $1.24 EPS on $9.02 billion of revenue for the current fiscal year. Fastenal holds a Zacks Rank #2, and the Industrial Services industry ranks in the bottom 7% of more than 250 industries, with the top half outperforming the bottom half by over 2 to 1.

Hudson Technologies has not yet reported, with estimates of $0.05 EPS, a -16.7% year-on-year change, and expected revenue of $57.06 million, up 3.1%.

The recent earnings report shows Fastenal met expectations, which often leads to a “sell the news” reaction after a big stock run-up. With shares already up 22.5% in 2026 while the S&P 500 is down, the big move may already be behind us for now. Implied volatility in the options market has likely collapsed after the report, making it more attractive to be a seller of options rather than a buyer.

We should be cautious because the broader industrial sector is showing signs of weakness. For instance, the most recent ISM Manufacturing PMI reading for March registered at 49.8, indicating a slight contraction in the manufacturing economy. This supports the view that the industrial services industry is struggling, which could create headwinds for Fastenal’s future growth despite their solid quarter.

For those holding the stock, this is a good environment to consider selling covered calls. This strategy allows us to generate income from the options premium while the stock potentially trades sideways in the coming weeks. Looking back at a similar situation in the second quarter of 2025, we saw the stock consolidate for a month after an in-line report, which rewarded those who sold premium.

Given the conflicting signals of a strong company in a weak industry, establishing a range-bound position like an iron condor could also be prudent. This would profit if the stock price remains stable, caught between strong company performance and a weak macroeconomic backdrop. Alternatively, buying protective puts could be a cheap way to hedge long positions, especially if management’s upcoming commentary hints at future softness.

Taiwan Semiconductor Manufacturing Company (TSM) is a key chip foundry, making processors used in artificial intelligence, smartphones, and data centres. A rising trendline on the daily chart has been in place since May 2025.

Over the past year, pullbacks have returned to this trendline, which sits around $335 to $340, and price has held there each time. During the March sell-off, the price again fell into that zone and then rebounded.

With the trendline still holding, price could move back towards the previous all-time highs just above $390. If price closes above that level on a daily basis, $400 becomes the next level to watch.

The view presented does not describe a plan to buy at current levels, as price is far from the trendline support. The focus is on possible selling pressure near $390 and $400, with the trendline area marked as a possible profit zone.

The trend remains upward unless there is a confirmed daily close below the trendline. Key levels mentioned are $335 to $340 for support, and $390 and $400 for resistance.

The primary structure we’re tracking is the ascending trendline that has supported Taiwan Semiconductor’s stock since May of 2025. This support level, now around the $335 to $340 area, successfully held during the market-wide selloff we saw in March. The bounce from that zone was strong, reinforcing the power of this bullish trend.

Recent data supports the strength leading into this test of the highs. We saw TSM report strong Q1 2026 earnings last week, with revenues up 25% year-over-year, largely due to continued demand for their advanced 3-nanometer chips for AI applications. Furthermore, industry-wide reports show global data center spending is forecast to increase another 20% this year, directly benefiting TSM’s order book.

For the coming weeks, as the stock approaches the prior all-time high near $390, we can look at buying put options. Specifically, May expiration puts with a strike price around $380 or $375 could offer a defined-risk way to profit from a potential rejection. This strategy positions for a pullback toward the established trendline support.

Another approach is to sell a bear call credit spread for the May monthly expiration. By selling the $395 call and buying the $405 call, we collect a premium and will profit if TSM’s stock price remains below $395 by expiration. This is a higher-probability trade that capitalizes on the stock failing to break out to new highs immediately.

The profit target for any bearish position should be the ascending trendline, currently near $335. We must remember how strong this support has been over the last year, so overstaying a short position as price approaches it is not advisable. We can respect the level that has repeatedly proven itself.

If we are wrong and buyers push the stock through the $390-$400 resistance zone on a confirmed daily close, the bearish trades must be closed. A breakout would invalidate the setup and signal the uptrend is accelerating. In that scenario, aggressive traders could then pivot to buying call options to participate in the next leg higher.

E-mini Dow Jones Futures (YM1!) traded in a rising parallel channel for about a year, moving from the April 2024 low towards 50,000–51,000. The price then fell below the channel’s lower trendline and is now near 47,578.

After the break, the former channel floor is now overhead resistance. That resistance area is around 49,000–49,500 at present, and it rises over time.

Former Channel Support Now Resistance

A rebound towards 49,000–49,500 is described as likely to attract selling pressure. The analysis expects a pullback if price reaches that zone.

Two support levels are marked below the current price. The first is 45,110, which has acted as both resistance and support over multiple tests.

If 45,110 fails, the next level is 43,586. This is presented as the next key area if selling continues.

Trading approaches are outlined for two risk profiles. One approach is to consider shorts near 49,000–49,500 with stops set if price breaks back above the trendline. Another approach is to consider buys near 45,110 or 43,586 with tight stops if those levels break.

Risk Profiles And Trade Planning

We remember the clean, year-long channel that broke in 2025, ending the steady grind up from the April 2024 lows. That break changed the market’s character, and now that we are trading around 47,578, the old rules of buying the dip no longer apply. The structure that defined that entire uptrend is now gone.

The lower trendline of that old channel, which used to be a reliable floor, is now hovering above us as resistance. As of today, April 13, 2026, that rising line sits near the 50,000 mark, presenting a formidable ceiling for any rally. With the latest March CPI report showing core inflation remaining stubborn at 3.4%, any push toward that level will likely be met with significant selling pressure.

Looking below, the first important support area we are watching is 45,110, a level that has acted as a pivot point for years. We saw this zone provide a floor during the market weakness in the fourth quarter of 2025, confirming its importance. Any renewed selling will have to contend with this historical battleground.

If that first support at 45,110 fails, the next key level is down at 43,586. A break to this point would shift market sentiment considerably, especially as the unemployment rate has recently ticked up to 4.1%. This is the area where a simple market correction could begin to feel much more serious.

Aggressive derivative traders can look to initiate short positions on any rally toward the old trendline near 50,000, using a break back above that line as a clear stop-loss. Alternatively, an aggressive long trade could be taken at the 45,110 support, but it requires a very tight stop in case the level gives way.

More conservative traders can also look to short the market near the 50,000 resistance but should wait for the bounce to show signs of failing first. On the long side, a patient approach would be to wait for a potential sell-off to the deeper and stronger support level at 43,586 before considering a purchase.

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Hungary’s election ended Viktor Orbán’s 16-year period in power, with Peter Magyar’s Tisza party on course for a supermajority. A two-thirds majority would allow Magyar to change institutions and the constitution more easily.

Plans include removing Orbán-aligned figures such as the president, senior judges, the chief prosecutor and heads of state regulators. Magyar has also said he will introduce a two-term limit for prime ministers.

Institutional Reset And EU Alignment

The proposed reforms could align Hungary more closely with EU standards and help release more than EUR20 billion in EU funds that are currently frozen over rule-of-law and corruption concerns. Under Orbán, Hungary blocked a EUR90–103 billion loan package intended to support Ukraine and repeatedly delayed or blocked EU aid and sanctions linked to Ukraine.

Following the result, the forint strengthened by over 2% against both the euro and the US dollar. The move adds to the forint’s strong performance among emerging market currencies this year.

Following the major political shift in Hungary back in April 2025, we saw the forint stage a powerful rally. This initial move was driven by the end of Viktor Orban’s rule and the expectation of normalized relations with the EU. The market priced in a significant amount of good news very quickly.

A year later, the currency’s momentum has stalled, even with tangible progress being made. After strengthening nearly 8% against the euro in 2025, the EUR/HUF exchange rate has been trading in a relatively tight range between 360 and 368 for the past quarter. While recent data shows the European Commission has disbursed over €12 billion in previously frozen funds, the market seems to be waiting for the next major catalyst.

Options And Volatility Setup

This period of consolidation has pushed implied volatility on EUR/HUF options down to multi-year lows, currently near 7.5% for one-month contracts. For us, this makes buying options an attractive strategy to position for a directional breakout, which could be triggered by news on the remaining EU funds or further institutional reforms. The low cost of options provides a cheap way to gain exposure to the forint’s next potential leg of appreciation.

We must also consider the Hungarian National Bank’s policy, as the country’s improved risk profile gives it more room to cut interest rates than its regional peers. Historically, similar political turnarounds, like the one we saw in Poland after its 2023 election, led to a sustained period of currency strength as foreign investment returned. Therefore, we should monitor interest rate derivatives to position for a potential divergence in monetary policy between Hungary and the ECB.

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Russia’s foreign trade value fell in February to $5.353bn from $6.597bn in the previous period. The change equals a drop of $1.244bn.

The February decline in Russia’s foreign trade surplus to $5.353 billion is a clear signal of mounting economic pressure. This suggests weakening export revenues are failing to keep pace with import costs, which directly impacts currency valuation. We should therefore anticipate continued weakness in the Ruble against major currencies in the near term.

This trade data aligns with recent reports showing Russian seaborne crude exports fell by 3.5% in the first quarter of 2026, while the price discount on Urals crude widened to an average of $19 below Brent. These figures support a bearish outlook on the Ruble, making long positions in USD/RUB futures or call options an increasingly logical strategy. We see this as a primary response to the news.

Looking back, we observed a similar dynamic in late 2025 when a dip in energy prices caused the trade balance to narrow significantly. The Ruble subsequently depreciated by 8% over the following quarter, a historical pattern that suggests the current trend could push the USD/RUB exchange rate past the 100 mark. This precedent reinforces our view that the currency is vulnerable.

The situation also creates opportunities in commodity derivatives, as any further tightening of Russian exports could impact global supply. We are considering long call options on commodities like wheat and aluminum, where Russia is a key producer, to hedge against potential price spikes from supply disruption. This is a secondary play based on the ripple effects of a strained Russian economy.

Bank of Japan Governor Kazuo Ueda said policymakers must stay alert as crude oil prices rise and global financial markets remain unstable due to the escalating Middle East conflict. He said Japan’s economic activity and inflation are broadly in line with forecasts.

Ueda warned that a prolonged conflict could disrupt supply chains and reduce factory output, which could weigh on the economy. He also said higher oil costs could affect underlying inflation in different ways, depending on the output gap and inflation expectations.

Oil Markets And Policy Vigilance

He said the Bank of Japan will track how events affect the economy, prices and financial conditions ahead of its policy meeting on 27–28 April. Japan’s preliminary March 2026 money stock data showed M2 rose 2.0% year on year and M3 rose 3.7%, up from 1.7% and 2.0% in February.

Bank of Japan Governor Ueda’s recent remarks signal a heightened sense of caution for us. With Brent crude recently pushing past $110 a barrel due to Middle East tensions, his focus on oil prices is a clear warning. The risk is that this external shock could force the BoJ to adopt a more hawkish stance than anticipated.

This situation places significant importance on the upcoming policy meeting at the end of April. Japan’s latest Tokyo Core CPI is already holding firm at 2.8%, well above the central bank’s target, making any new inflationary pressure from energy costs particularly concerning. We must watch for any change in tone that suggests a faster pace of policy normalization is on the table.

For derivative traders, this introduces a clear risk of a stronger yen in the coming weeks. The USD/JPY has been hovering near the 160 level, a point of high sensitivity for Japanese officials. A surprisingly hawkish BoJ could trigger a sharp downward move in the currency pair.

Options Positioning For A Stronger Yen

Considering this, we should look at positioning for a stronger yen through options. Buying JPY call options or USD/JPY put options with expirations after the late April meeting offers a defined-risk way to capitalize on potential volatility. This strategy protects against a sudden policy shift driven by the external shocks Ueda is monitoring.

The backdrop of rising money supply, with M3 growth accelerating to 3.7% in March, further supports this cautious view. After the historic end to negative interest rates we saw back in 2025, the BoJ is now clearly data-dependent. These new variables increase the odds of a policy surprise that could strengthen the yen.

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